Side Effects: Obamacare’s Exploding Medicaid Costs

Kathryn Nix /
July 07, 2010

The states are in Big Trouble. While Americans are fearful of record federal deficits, the states also are facing increased costs. Most of the exponential growth comes from increased Medicaid costs, and the taxpayers in the states are going to pay for it.

A new Deloitte study gives predictions that by 2030 Medicaid costs could rise to somewhere between 35% and 50% of states budgets. The study referred to these exploding costs as a “ticking time bomb” that “has the potential to debilitate government effectiveness.” State budgets will be stretched by rapidly growing costs for long-term care, an aging population, and government mandates for increased access to health care.

Deloitte’s Robert Campbell said, “Even with the level of growth in Medicaid, long-term care costs are forecasted to grow even faster.” Long-term care, services for those with chronic illnesses or disabilities, currently accounts for a third of Medicaid spending. The aging population also guarantees increased spending. These two factors, combined with legislation to increase coverage, are behind the spiraling costs that states will face.

As bad as it is for the states, it’s become clear that Washington’s “help” will be limited and confined to its mandatory expansions. Deloitte reports, “The health care reform bill provides little near-term relief: States must innovate with a sense of urgency to address this burning platform.” Ultimately, the new law’s mandates for increased coverage will make the problem worse. Medicaid coverage will expand, states will have to cover them, and, eventually, foot the bill. These increased expenses will necessarily minimize spending in other areas as the states attempt to operate within their budgets.

This “time bomb” is already ticking. The problem for states is how they can minimize the damage. Excessive Medicaid costs will inhibit state governments from pursuing other budget priorities. A real reform of healthcare that would return a lot of decision-making to the states would alleviate many of the states’ burdens. But Obamacare only makes their problems worse.